Marcus by Goldman Sachs is an online bank that launched in the UK in 2018 and uses the expertise of Goldman Sachs combined with technology to offer a range of easily accessible online savings accounts. They’ve shared their top five tips to help savers upgrade their savings habits and make the most out of their money:
1: Find the right mix of savings accounts
Different savings accounts can help one work towards different types of savings goals, assessing your current accounts and comparing them to other available options may help in highlighting which account type fits your financial goals best.
“Easy access accounts give you flexibility to withdraw money without having to give any notice. The interest rate tends to be variable, which means it can change from time to time.
“Fixed term savings accounts give you the security of locking in an interest rate for a set length of time – so you’ll know exactly how much interest you’ll earn over that period – but usually access to your money is restricted.
“An Individual Savings Account (ISA) is a savings account that protects the interest on your savings from tax. There are several different types, but essentially, they are all a way to save or invest your money and keep the interest you earn on it protected from UK tax.
“The four main types of ISAs are: cash ISA, stocks & shares ISA, innovative finance ISA, and lifetime ISA.”
2: Build an emergency fund
The past 18 months has shown how useful an emergency fund can be. To begin one, simply start by finding a safe and easily accessible account to place it in, and work the extra savings into your budget.
“This type of savings fund is far more long-term in its purpose so saving as little as £25 per month can provide a priceless piece of mind in the long run.”
3: Budgeting can help maximise saving potential
Budgeting is at the core of all savings goals and strategies, but the key to budgeting correctly is finding the right method and being realistic.
“The 50/30/20 rule – If you’re looking to save but want to enjoy spending your hard-earned money too, this rule might work for you. 50 percent of your total monthly budget is put towards essentials like your rent or mortgage, travel, food shopping and bills. You can then spend 30 percent on what you like: perhaps that’s gym memberships, shopping or socialising. Then the remaining 20 percent could go towards your savings.
“60 percent solution – If you have a specific goal you need to save for, such as buying a new house, then this solution could work for you. 60 percent of your income could go towards fixed ‘committed expenses’, e.g. your mortgage. The remaining 40 percent could be divided depending on your circumstances and goals, e.g. retirement, long-term savings, short-term savings and ‘fun money’.”
5: Get to know financial terms
The finance industry is constantly changing and evolving, staying up-to-date on all terminology one comes across can prevent serious misunderstandings that come with large financial regrets.
“Here are three of the most used, but often misunderstood, terms you may encounter:
AER and gross interest rate: The Annual Equivalent Rate (AER) illustrates what your interest rate (the gross interest rate) would be if interest was paid and compounded once each year. The key thing to remember when comparing different savings accounts is to compare like with like – so either AER with AER, or gross with gross.
Base rate: In the UK, interest rates can be influenced by the Bank of England base rate. If the base rate goes up or goes down, it can affect the rates that banks offer to customers – and ultimately how much interest you can earn on your savings.
Compounding, or compound interest – Compounding is when interest is paid on your total savings, including previously earned interest. In other words, compound interest is interest on interest. Ultimately helping to grow your savings faster.”
This post originally posted here Daily Express :: Finance Feed